There will always be people who want to take unfair advantage of others.
It's especially true when it comes to investing, where people are frequently seeking a shortcut to making fast cash.
It’s important to choose reputable gold IRA firms and precious metal firms when looking for ways to invest in physical gold.
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As an investment, precious metals such as silver and platinum have become increasingly popular in recent years, which makes them a prime target for scam artists who take people’s money by tricking them into believing they're investing in something valuable when they're really not.
It's important to know about the most common types of gold fraud so that you don't fall victim to them.
Furthermore, using the right investment app to track the market and stay on the lookout for scams can also help you avoid becoming a victim of fraud.
Here, I'll discuss some of the most common types of gold scams and give you tips for staying safe when buying gold investments.
Before we start, if you're interested in finding out everything there is to know about the lies that gold IRA dealers tell and what you can do about them, here's a free report that you may want to check out.
Former NFL quarterback Joe Montana has made investments in both stocks and real estate using his knowledge of statistics.
Well-Known Gold Scams
A number of banks and financial institutions in Mainland China were caught up in a massive fraudulent gold scam centered in Wuhan.
Once a major jewelry manufacturer, Kingold had so much cash that they were able to borrow $2.8 billion from 14 different financial institutions and use their own gold deposits as collateral for the loans.
The problem: About $83 million worth of gold bullion was reportedly counterfeit.
When one of their lenders called them in for defaulting on payments, they found out that he'd been stealing from them.
Kingold didn't have enough cash to pay back its debts, so it had to sell off some of its gold reserves.
On inspection, the banks discovered that many of the bars deposited at their vaults were actually made from gilded copper instead of solid silver.
There was no direct harm done to any specific individuals by this scandal.
But the sheer magnitude of the scam shows just how much money and resources go into scams.
If 14 established banks were so easily fooled, what hope does an individual retail gold dealer or investor have?
There really is quite a lot you could do to prevent yourself from becoming infected.
You shouldn't just sit there and let things happen.
Many financial advisors recommend holding some form of physical assets like precious metals in your retirement plans.
Physical silver and physical platinum represent a way to diversify your investment portfolios against inflation, currency risks, and other dangers.
Understanding the different ways scammers operate is the best way to protect yourself from them.
China is home to many of the world's largest and most sophisticated fake goods and counterfeiting operations.
Non-Delivery Scams/Ponzi Schemes
A Ponzi Scheme involves taking money from new investors rather than using the funds to invest.
One such example was when Northwest Territorial Mints' owners received millions of dollars worth of gold coin sales.
They lied about shipping time, but they spent the money on expanding the scam to other states and for themselves.
They paid off their old customers by using the funds they received from new ones.
According to the U.S. Attorney for the Northern District of Illinois, Northwestern Mint defrauded thousands of its clients by charging them fees they never received. As a result, the company lost millions of dollars and was convicted of 14 felonies.
A similar case involves Hannes Tulving of New Port Beach, California, who was president of The Tulving Company, which sold gold and silver over the internet.
Tulving's scheme began by failing to deliver the gold coins and precious metal coins he had sold his customers.
Instead, Tulving spent his own funds to fund his lifestyle and kept the scam going as long as he could before he was caught.
When people asked for refunds because their orders hadn't shipped, Tulving would make various explanations and give them back the metal or return their payments only if they threatened legal action.
By the time the FBI got involved, Tulving was already stealing over $15 million from hundreds of different victims.
Lessons Learned
Make noise early.
Yes, there are sometimes delays when ordering from legitimate sellers.
If you're feeling like you're getting taken advantage of, it's best to ask for a refund sooner rather than later. Even if you have to threaten to sue them rather than be one of the last few remaining in the scam.
‘Rare Coin' Valuation Scams
Unscrupulous coin dealers may persuade people to buy rare, collector’s, mint condition coins at extremely inflated prices over their actual value.
Sometimes the gold dealer sells a similar piece of jewelry for less than its actual worth.
Ordinary consumers cannot tell the difference between fake and real products.
A woman who was 90 years old got an offer from a dealer offering to sell her coin collections for just $10,000. She accepted the offer.
She agreed and sent him the coins. But when he gave them back, she found out they were worth less than before. He only gave her $8,500 instead of the original $10,000.
She smelled a rat and refused to return her change.
The dealer waited for the woman to threaten him before he returned her change.
She was finally able to get a different set of coins from the casino.
After she had her coins appraised, she discovered they were actually worth only $1,000.
She was never able to recover any of her lost coins or her missing money.
Bullions are coins and bars made specifically for their precious metal content. They're usually sold at close to their spot price (the current market value).
Experts should avoid rare coins, proof sets, and collectibles.
Because they stick to ordinary bullions products and pay very close to the spot prices for precious metals, buyers and sellers leave minimal opportunities for scammers to exploit people’s lack of knowledge in a value scam.
Gold IRA Scams
If you're interested in buying gold for an investment, then you might want to consider purchasing some from an online dealer.
If that happens, then it's a good thing to deal with an IRA company that specializes in dealing with retirement account investments.
There are several reasons why this happens:
First, Congress and IRS have placed significant restrictions on the types of gold, silver, platinum, and palladium that may be held inside IRAs.You cannot purchase any other type of precious metal besides gold, silver, platinum, palladium, and rhodium for your IRA investments. All your precious metal holdings must be gold, silver, or platinum/palladium. You may own any number of these types of bullion at one time. You cannot invest in precious metal IRAs unless they're issued by a national mint, refinery, or manufacturer that is approved by NYMEX, CME, NYSE/LIFFE, LME, LBTA, LPPM, TCO, or ISO 9000 standards. Proof coins must be complete, in original mint packages, and in excellent condition, and they must include a certificate of authentication. All small bullion coins must be manufactured to exactly specified weights. Proof (bullion) coin must be in perfect mint state.
Some unscrupulous or ignorant people may try to trick you into buying their collectible coin, bar, or round for your IRA by giving you misleading sales pitches.
They're just looking for a quick buck.
If you try to hold numismics, collectibles, or unauthorized coins within an IRA, you may be subject to penalties.
If that happens, then the IRS might disallow the entire IRA. It would be best to consult an accountant before taking any action.
If you decide to invest in real estate, you could face substantial tax liabilities and penalties.
The Home Storage Gold IRA Scam
Any physical gold, etc., must be kept in custody by an approved custodian, such as an independent vault or depository.
You cannot take physical ownership of your gold IRA assets; they belong to the company.
They cannot be stored in a bank vault or even a safety deposit lock box under your full access.
Some precious metal investors have been misled by unscrupulous brokers into thinking they could invest their savings in a “home storage” IRA.
They mean that you could purchase gold bullions, palladium, platinum, and other precious metal forms and store them at their own depository facilities instead of storing them at third-party depository vaults that act as an IRA custodian.
It's now clear that attempting to keep gold and silver IRAs at home is illegal.
If you want to keep your gold bullion and other precious metal holdings safe from creditors, you can store them in your own name outside of an IRA.
If you want to keep the physical assets inside your IRAs, 401(k)s, SEPs, or SIMPLES, you must never touch them.
You don't want to keep holding onto your precious metal IRA assets because they're not doing anything for you. So instead, you have your precious metal dealer send the physical assets to a third-party depotitory facility until you decide whether you want to hold onto them or not.
Affiliate Scams
An affiliate scam involves criminals exploiting their affiliations to gain the trust of potential victims before they exploit them for financial gain.
Scammers often take advantage of other members of religious groups, synagogues, or veteran organizations.
People often trust people similar to themselves, so they're particularly susceptible to scams and fraud.
For instance, Larry Bates, together his wife and two sons, heavily promoted their precious metal business, First American Monetary Consulting, through Christian and Jewish TV and radio station.
He held several seminars and conventions throughout the United States, promoting his investment advice to religious groups, spreading fear of impending financial doom, and encouraging people to buy gold.
He was a good salesperson: Between 2007 and 2013, he sold his company for more than $87 million to another firm.
He wasn't a responsible steward of their money: According to the Justice Department, he used their money for his personal expenses and commodities trades.
He spent $4 million building an evangelical media company, the International Radio Network (IRN), to further promote his family’s schemes. And he created a 10,000-square-foot mansion on 300 acres in Tennessee for himself.
By 2009, the firm had already bilked investors out of nearly $26 million in unfulfilled orders for precious metal futures contracts.
The family was eventually sent to federal prison for a total of 627 years.
The affiliate program isn't limited to religious affiliations; the FTC says that African Americans and Latinos are also vulnerable to being taken advantage of by scammers looking to exploit their faith in fellow minorities.
Counterfeiting
There are multiple large-scale, sophisticated counterfeit operations operating with the assistance of corrupt government officials in both China and South Africa.
However, the counterfeiters don't limit themselves to these areas: They operate almost anywhere in the world. Gold/silversmiths must be constantly vigilant.
A 34-year-old man from New Jersey has been convicted of importing and exporting fake silver Morgan dollars.
He also admitted to stealing gold from his employer for personal gain.
He wore a fake ATF badge when meeting with buyers to lower their suspicions and increase his chances of success.
Counterfeiters often use real gold to create fake bars. However, they're not always successful at hiding their crimes.
The scheme allows criminals who want to evade sanctions to move their funds through multiple jurisdictions.
China, especially, has been the source of many fake gold pieces. Criminals have produced hundreds of thousands of fakery from metals like tungsten or even just using base metal (like brass) and applying a thin layer of gold for color.
Many of these cryptocurrencies are traded online instead of at physical locations.
Gold buyers who've been dealing for years can usually tell if a piece of gold they're looking at is real just by its appearance.
Even if that doesn't work, savvy buyers often check the coin's weight and thickness using scales and caliper tools.
Criminally selling fake coins online isn't difficult because there's no way to know if they're real or not.
And the picture on the site may not be what you get when you buy the product. If you ever get anything, that is.
Many people buy very persuasive fakes over the internet and don't realize they've been fooled for years – when they attempt to resell them.
They learn that it's fake when they get caught by their neighbor who sells them drugs. Only buy from established and reputable dealers, even if they're expensive. Look for reviews from reputable websites. Get yourself a scale and calipers so you can quickly spot any fakers. Any coin or bar selling at a lower price than its spot price is likely fake. When buying precious metals for storage purposes, ensure that the company offering the service is properly licensed by the National Futures Association. Buy a scale and measuring tape. Know the exact weight of every penny you're considering buying. For example: $0.01 = 1 cent; $1 = 10 cents; $10 = 100 cents; etc.One ounce of 24k pure (or “24K”) solid.999 fine silver coinage should weigh exactly 31.1 grams. If you want to buy 22k pure solid 24-karat yellow (or white) topaz gemstones, then you need to know that they weigh approximately 33.9 grams each.
Gold Scam Warning Signs
Be careful of any investment advisor who tries to tell you that buying physical precious metals such as silver and/or palladium doesn't involve risk. In reality, both investments do carry risks. Just because they're not stocks, bonds, or mutual funds does not mean they aren't risky. And just because they're not insured by the Federal Government or FDIC doesn't mean
Based on a post from https://www.adamenfroy.com/gold-ira-scams
